Secura Ins. v. 33 Allenton Venture, LLC

• Decision Date: 07 December 2022
• Docket Number: 2021AP807
• Parties: Secura Insurance, A Mutual Company, Plaintiff-Appellant, v. 33 Allenton Venture, L.L.C. and Norse Building Products, Inc., Defendants-Respondents.
• Court: Wisconsin Court of Appeals

Secura Insurance, A Mutual Company, Plaintiff-Appellant, v. 33 Allenton Venture, L.L.C. and Norse Building Products, Inc., Defendants-Respondents.

No. 2021AP807

Court of Appeals of Wisconsin, District II

December 7, 2022

APPEAL from an order of the circuit court for Winnebago County: Cir Ct. No. 2020CV78 SCOTT C. WOLDT, Judge. Reversed and cause remanded with directions.

Before Gundrum, P.J., Neubauer and Grogan, JJ.

GUNDRUM, P.J.

¶1 Secura Insurance, A Mutual Company, appeals from an order of the circuit court concluding that insurance coverage exists for damage caused by water that flowed from a broken pipe located below a building owned by 33 Allenton Venture, L.L.C. and in which Norse Building Products, Inc. was a tenant. Specifically, Secura contends the court erred because the water exclusion in separate insurance policies it issued to 33 Allenton and Norse bars coverage for the damage. Because we agree with Secura, we reverse and remand for the entry of declaratory and summary judgment in its favor.

Background

¶2 The material facts are undisputed. In 2019, a pipe owned by 33 Allenton, located beneath its building, and connected to a municipal water pipe failed, allowing water to escape and cause damage to the basement, foundation, and floors of the building as well as Norse's leased premises and personal property. Prior to that damage occurring, Secura had issued insurance policies to both 33 Allenton and Norse.^[1] Secura paid 33 Allenton $32,280 for the cost to repair the pipe itself but maintains that the water exclusion in each policy bars coverage and it owes no additional amounts.

¶3 Secura brought a declaratory judgment action seeking a ruling on the question of coverage. 33 Allenton and Norse counterclaimed for breach of contract and declaratory judgment, and Norse also counterclaimed for promissory estoppel. Secura filed a motion for declaratory judgment and summary judgment and 33 Allenton and Norse filed motions for summary judgment. The circuit court granted 33 Allenton's and Norse's motions, concluding that the policies afford coverage for the water damage. The parties stipulated to the amount of damages, Norse dismissed its promissory estoppel claim, and Secura appeals.

Discussion

¶4 We review the circuit court's grant of summary judgment de novo.^[2] Paskiewicz v. American Fam. Mut. Ins Co., 2013 WI.App. 92, ¶4, 349 Wis.2d 515, 834 N.W.2d 866. "Summary judgment is properly granted if there is no genuine issue of material fact in dispute and the moving party is entitled to judgment as a matter of law." American Fam. Mut. Ins. Co. v. American Girl Inc., 2004 WI 2, ¶22, 268 Wis.2d 16, 673 N.W.2d 65. Although declaratory judgment "is addressed to the discretion of the [circuit] court," our review is de novo "[w]hen the exercise of discretion depends upon a question of law" such as the "interpretation of an insurance" policy. Praefke v. Sentry Ins. Co. 2005 WI.App. 50, ¶5, 279 Wis.2d 325, 694 N.W.2d 442.

¶5 "Insurance policies are contracts, and they should be interpreted as such." Romero v. West Bend Mut. Ins. Co., 2016 WI.App. 59, ¶18, 371 Wis.2d 478, 885 N.W.2d 591.

Judicial interpretation of a contract, including an insurance policy, seeks to determine and give effect to the intent of the contracting parties. Insurance policies are construed as they would be understood by a reasonable person in the position of the insured. However, we do not interpret insurance policies to provide coverage for risks that the insurer did not contemplate or underwrite and for which it has not received a premium.

American Girl, Inc., 268 Wis.2d 16, ¶23 (citations omitted). "We give words used in [an insurance] policy their plain and ordinary meaning." Frank v. Wisconsin Mut. Ins. Co., 198 Wis.2d 689, 694, 543 N.W.2d 535 (Ct. App. 1995). "When the terms are plain and unambiguous, we will construe the contract as it stands." Id. The "[i]nterpretation of an insurance policy is a question of law we review de novo." Romero, 371 Wis.2d 478, ¶18.

¶6 When interpreting an insurance policy, we first "examine the facts of the insured's claim to determine whether the policy's insuring agreement makes an initial grant of coverage. If it is clear that the policy was not intended to cover the claim asserted, the analysis ends there." American Girl, Inc., 268 Wis.2d 16, ¶24. If, however, the claim triggers an initial grant of coverage under the policy, we then "examine the various exclusions to see whether any of them preclude coverage of the present claim." Id. (emphasis added). "Exclusions are narrowly or strictly construed against the insurer if their effect is uncertain." Id. Further,

[w]e analyze each exclusion separately; the inapplicability of one exclusion will not reinstate coverage where another exclusion has precluded it. Exclusions sometimes have exceptions; if a particular exclusion applies, we then look to see whether any exception to that exclusion reinstates coverage. An exception pertains only to the exclusion clause within which it appears; the applicability of an exception will not create coverage if the insuring agreement precludes it or if a separate exclusion applies.

Id. (emphasis added).

¶7 In this case, the parties stipulated that the insureds'^[3] claims triggered an initial grant of coverage. Accordingly, we focus on whether a policy exclusion precludes coverage of the claims. See id.

¶8 The water exclusion provides^[4] in relevant part that Secura

will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

.…

g. Water

1. Flood, surface water, waves (including tidal wave and tsunami), tides, tidal water, overflow of any body of water … all whether or not driven by wind (including storm surge);

2. Mudslide or mudflow;

3. Water that backs up or overflows or is otherwise discharged from a sewer, drain, sump, sump pump or related equipment;

4. Water under the ground surface pressing on, or flowing or seeping through: a.Foundations, walls, floors or paved surfaces; b.Basements, whether paved or not; or c. Doors, windows or other openings; or

5. Waterborne material carried or otherwise moved by any of the water referred to in Paragraph 1., 3. or 4., or material carried or otherwise moved by mudslide or mudflow.

This exclusion applies regardless of whether any of the above, in Paragraphs 1. through 5., is caused by an act of nature or is otherwise caused. An example of a situation to which this exclusion applies is the situation where a dam, levee, seawall or other boundary or containment system fails in whole or in part, for any reason, to contain the water.

(Emphasis added.) So, as relevant, this exclusion provides that Secura "will not pay for loss or damage caused directly or indirectly by … [w]ater under the ground surface pressing on, or flowing or seeping through: a. Foundations, walls, floors or paved surfaces; b. Basements …; or c. Doors, windows or other openings" "regardless of any other cause or event that contributes concurrently or in any sequence to the loss" and "regardless of whether" the pressing on/flowing through/seeping through water "is caused by an act of nature or is otherwise caused."

¶9 The insureds advance four reasons why this exclusion does not bar coverage for the damage at issue here. Each of these is easily dispatched.

¶10 The insureds first contend this exclusion's "plain language only applies to damage caused by water that originates from causes outside the Covered Premises," hanging their hat on the "example" in the last paragraph, which they assert "show[s] that [this exclusion] only relates to water from outside causes or malfunctions." The insureds place far too much weight on this example.

¶11 To begin, the language of the water exclusion certainly does not say it "only applies to damage caused by water that originates from causes outside the Covered Premises." Additionally, while water from floods, tides, "overflow of any body of water," and mudslides-in the first two paragraphs of the exclusion- would tend to originate from causes outside a covered premises, such origination cannot be assumed in connection with "[w]ater that backs up or overflows or is otherwise discharged from a sewer, drain, sump, sump pump or related equipment"-in the third paragraph-as sump pumps, for example, are on site.

¶12 Furthermore, the sentence immediately preceding the example sentence indicates that the water exclusion applies "regardless of whether" the water under the ground surface that presses on/flows through/seeps through foundations, floors, basements, doors or other openings (or water "that backs up or overflows or is otherwise discharged from a … sump pump" for that matter) is caused "by an act of nature or is otherwise caused." (Emphasis added.) There is no need for a hurricane or tidal wave to cause a levee or seawall to fail for this exclusion to apply. Here, the pressing/flowing/seeping water was caused "otherwise" than by an act of nature-i.e., the continuing flow of water after a pipe under the building failed. The example relied on by the insureds is just that, one example; it does nothing to undermine the plain language of the water exclusion and in no way limits the applicability of this exclusion to only circumstances in which the damage is caused by water that originates from offsite causes.

¶13 Second, the insureds claim the water exclusion does not bar coverage because of language in an exception to one of the more than a dozen other exclusions in the policies-the wear and tear exclusion. The wear and tear exclusion provides that Secura

will not pay for loss or damage caused

...